Redlands Unified School District

BETTY T. YEE California State Controller September 16, 2015 Lori Rhodes, Superintendent Redlands Unified School District 20 W. Lugonia Avenue Redlands, CA 92374 Dear Ms. Rhodes: The State Controller’s Office performed a desk review of costs claimed by the Redlands Unified School District for the legislatively mandated Collective Bargaining and Collective Bargaining Agreement Disclosure Program (Chapter 961, Statutes of 1975; and Chapter 1213, Statutes of 1991) for the period of July 1, 2010, through June 30, 2012. We conducted our review under the authority of Government Code sections 12410, 17558.5, and 17561. Our review was limited to ensuring that direct and indirect costs were properly reported in accordance with program requirements. The district claimed $59,996 for the mandated program. Our review found that $39,033 is allowable and $20,963 is unallowable. The costs are unallowable because the district did not report the Winton Act base-year costs and did not claim indirect costs for contract services, as described in the attached Summary of Program Costs and the Review Results. The State made no payments to the district. The State will pay $39,033, contingent upon available appropriations. We informed Brian Guggisberg, Director of Fiscal Services, of the findings via email on August 19, 2015. We did not receive a response from the district. If you disagree with the review findings, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (Commission). The IRC must be filed within three years following the date of this report. You may obtain IRC information at the Commission’s website at www.csm.ca.gov/docs/IRCForm.pdf. If you have any questions, please contact Jim L. Spano, Chief, Mandated Cost Audits Bureau, by telephone at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits P.O. Box 942850, Sacramento, CA 94250  (916) 445-2636 3301 C Street, Suite 700, Sacramento, CA 95816  (916) 324-8907 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754  (323) 981-6802 Lori Rhodes, Superintendent -2- September 16, 2015 JVB/ls Attachments RE: S15-MCC-9041 cc: Bernie Cavanagh, Assistant Superintendent Business Services Redlands Unified School District Brian Guggisberg, Director Fiscal Services Redlands Unified School District Cynna Hinkle, Director Business Advisory Services San Bernardino County Superintendent of Schools Peter Foggiato, Director School Fiscal Services Division California Department of Education Amy Tang-Paterno, Education Fiscal Services Consultant Government Affairs Division California Department of Education Thomas Todd, Assistant Program Budget Manager Education Systems Unit, California Department of Finance Jay Lal, Manager Division of Accounting and Reporting State Controller’s Office Redlands Unified School District Collective Bargaining and Collective Bargaining Agreement Disclosure Program Attachment 1— Summary of Program Costs July 1, 2010, through June 30, 2012 Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment Reference 1 July 1, 2010, through June 30, 2011 Direct costs: Component activities G1 through G3: Salaries and benefits $ 4,786 $ 4,786 $ - Contract services 1,114 1,114 - Subtotal 5,900 5,900 - Less base-year direct costs adjusted by the Implicit Price Deflator - (13,951) (13,951) Finding 1 Subtotal 5,900 (8,051) (13,951) Adjustment to eliminate negative balance - 8,051 8,051 Increased direct costs, G1 through G3 5,900 - (5,900) Component activities G4 through G7: Salaries and benefits 5,325 5,325 - Contract services 34 34 - Increased direct costs, G4 through G7 5,359 5,359 - Total increased direct costs, G1 through G7 11,259 5,359 (5,900) Indirect costs 484 257 (227) Findings 1, 2 Total program costs $ 11,743 5,616 $ (6,127) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 5,616 July 1, 2011, through June 30, 2012 Direct costs: Component activities G1 through G3: Salaries and benefits $ 27,577 $ 27,577 $ - Travel 29 29 - Contract services 2,565 2,565 - Subtotal 30,171 30,171 - Less base-year direct costs adjusted by the Implicit Price Deflator - (14,422) (14,422) Finding 1 Increased direct costs, G1 through G3 30,171 15,749 (14,422) Component activities G4 through G7: Salaries and benefits 13,435 13,435 - Materials and supplies 3,069 3,069 - Contract services 34 34 - Increased direct costs, G4 through G7 16,538 16,538 - Total increased direct costs, G1 through G7 46,709 32,287 (14,422) Indirect costs 1,544 1,130 (414) Findings 1, 2 Total program costs $ 48,253 33,417 $ (14,836) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 33,417 1 of 2 Redlands Unified School District Collective Bargaining and Collective Bargaining Agreement Disclosure Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment Reference 1 Summary: July 1, 2010, through June 30, 2012 Total increased direct costs, G1 through G7 $ 57,968 $ 37,646 $ (20,322) Indirect costs 2,028 1,387 (641) Total program costs ² $ 59,996 39,033 $ (20,963) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 39,033 _________________________ 1 See Attachment 2, Review Results. 2 The $20,963 review adjustment is the $29,014 adjustment for Findings 1 and 2, net of the negative allowable cost reduction of $8,051 for FY 2010-11. 2 of 2 Redlands Unified School District Collective Bargaining and Collective Bargaining Agreement Disclosure Program Attachment 2— Review Results July 1, 2010, through June 30, 2012 BACKGROUND— In 1975, the State enacted the Rodda Act (Chapter 961, Statutes of 1975), requiring the employer and employee to meet and negotiate, thereby creating a collective bargaining atmosphere for public school employers. The legislation created the Public Employment Relations Board to issue formal interpretations and rulings regarding collective bargaining under the Rodda Act. In addition, the legislation established organizational rights of employees and representational rights of employee organizations, and recognized exclusive representatives related to collective bargaining. On July 17, 1978, the Board of Control (now the Commission on State Mandates [Commission]) determined that the Rodda Act imposed a state mandate upon school districts, reimbursable under Government Code section 17561. Chapter 1213, Statutes of 1991, added Government Code section 3547.5. This section requires school districts to publicly disclose major provisions of a collective bargaining effort before the agreement becomes binding. On August 20, 1998, the Commission determined that this legislation also imposed a state mandate upon school districts, reimbursable under Government Code section 17561. Claimants are allowed to claim increased costs. For components G1 through G3, increased costs represent the difference between the current- year Rodda Act activities and the base-year Winton Act activities (generally, fiscal year [FY] 1974-75), as adjusted by the Implicit Price Deflator. For components G4 through G7, increased costs represent actual costs incurred. The seven components are as follows: G1 – Determining bargaining units and exclusive representatives G2 – Election of unit representatives G3 – Cost of negotiations G4 – Impasse proceedings G5 – Collective bargaining agreement disclosure G6 – Contract administration G7 – Unfair labor practice charges The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. The Commission adopted the parameters and guidelines on October 22, 1980, and amended them ten times, most recently on January 29, 2010. In compliance with Government Code section 17558, the State Controller’s Office (SCO) issues claiming instructions to assist school districts in claiming mandated program reimbursable costs. 1 of 3 Redlands Unified School District Collective Bargaining and Collective Bargaining Agreement Disclosure Program The current findings are the result of our review of the mandated cost claims filed for the legislatively mandated Collective Bargaining and Collective Bargaining Agreement Disclosure Program for the period of July 1, 2010, through June 30, 2012. FINDING 1— The district did not report the Winton Act direct costs in its mandated cost claims for FY 2010-11 and FY 2011-12. Specifically, the district did not Unreported Winton Act offset the Winton Act base-year costs against the current-year Rodda Act base-year direct costs and costs for components G1 through G3, thus understating the Winton Act related indirect costs base-year costs by $28,373 for the review period. In addition, unallowable related indirect costs total $787. The following table summarizes the unreported Winton Act base-year cost adjustments by fiscal year: Fiscal Year 2010-11 2011-12 Total Winton Act base-year costs, FY 1996-97 $ (3,044) $ (3,044) Implicit Price Deflator (IPD) × 4 .583 × 4 .738 Winton Act base-year costs adjusted by the IPD (13,951) (14,422) $ (28,373) Less reported Winton Act base-year costs - - - Unreported Winton Act base-year costs adjusted by the IPD (13,951) (14,422) (28,373) Related indirect cost adjustment (282) (505) (787) Review adjustment $ (14,233) $ (14,927) $ (29,160) The parameters and guidelines (section H., Supporting Data for Claims – Report Format for Submission of Claim) state: a. For component activities G1, G2, and G3: 1. Determination of the “increased costs” for each of these three components requires the costs of current year Rodda Act activities to be offset [reduced] by the cost of the base-year Winton Act activities. The Winton Act base-year is generally fiscal year 1974-75. Winton Act base-year costs are adjusted by the Implicit Price Deflator prior to offset against the current year Rodda Act costs for these three components. The Implicit Price Deflator shall be listed in the annual claiming instructions of the State Controller. The Winton Act base-year costs were obtained from the FY 1996-97 claim the district submitted to the SCO’s Division of Accounting and Reporting. The Implicit Price Deflator is reported in the SCO’s annual claiming instructions. 2 of 3 Redlands Unified School District Collective Bargaining and Collective Bargaining Agreement Disclosure Program Recommendation Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.6, in lieu of filing annual mandated cost claims. If the district chooses to opt out of the block grant program, we recommend that the district ensure that all Winton Act base-year costs are adjusted by the Implicit Price Deflator, as listed in the SCO’s annual claiming instructions, and are properly offset against the district’s current-year Rodda Act direct costs claimed. FINDING 2— The district did not claim indirect costs for contract services for FY 2010-11 and FY 2011-12, resulting in an understatement of $146. We Unclaimed indirect costs determined allowable indirect costs by multiplying claimed contract for contract services services by the indirect cost rate claimed by the district, which agreed to the indirect cost rate approved by the California Department of Education (CDE). The parameters and guidelines allow indirect cost rates provisionally approved by the CDE. The CDE indirect cost rates are applied to total direct costs (salaries and benefits, materials and supplies, and contract services). The following table summarizes the calculation of unclaimed indirect costs for contract services by fiscal year: Fiscal Year 2010-11 2011-12 Total Claimed contract services $ 1 ,148 $ 2 ,599 Claimed indirect cost rate 4.79% 3.50% Review adjustment $ 5 5 $ 9 1 $ 1 46 Recommendation Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.6, in lieu of filing annual mandated cost claims. If the district chooses to opt out of the block grant program, we recommend that the district follow the SCO claiming instructions for calculating indirect costs. 3 of 3